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b'In December 2014, my commentary focused on the risks of annuities and I urged my listeners not to give in to the hard sell of annuities without reading the fine print.
Annuity 101
Here\\u2019s a quick recap.

An annuity is a hybrid product that combines aspects of an insurance product and a mutual fund.

Here\\u2019s how most annuities are structured: When you buy an annuity, the underwriter subtracts certain fees and expenses and does some math to come up with a fixed amount he can pay you each year\\u2026 say that works out to $5,000 that you will receive each year for the rest of your life, without any adjustments for inflation. But over the course of say 20 years, with inflation at about 3%, the purchasing power of $5,000 drops significantly\\u2026 to the equivalent of about $2,000 \\u2013 so your annuity income stream does not keep pace with inflation and loses purchasing power significantly over time.

There are different types of annuities, with the popular ones classified by an alphabet. Annuities with C shares and L shares generally offer investors the ability to withdraw their premium payments or exchange their contracts sooner or even immediately without paying a surrender charge. In the case of C shares, they generally have no surrender period during which an investor would have to pay a charge for such a withdrawal. But the investor generally pays higher ongoing fees for that early withdrawal benefit. And these products offer a rich compensation stream for broker-dealers and their affiliated financial advisers.

Riders, which come at an extra cost, are added to annuity contracts to blunt the market risk in the product\'s underlying investments. They offer additional features, such as death benefits that protect income or withdrawals if the beneficiary lives longer than expected.

Most annuities also charge fairly high fees \\u2013 from 3.5% to 5% each year\\u2026 so if your annuity earns about 5% to 7% a year\\u2026 after fees, you only end up with a net yield of 1.5% to 3.5% each year. And the rub is that most of these fees go towards paying generous broker commissions\\u2026 which is why annuity salespersons sell you pretty hard, often locking-you into unrealistic expectations.

And should you choose to break an annuity, you\\u2019ll end up paying pretty hefty penalties. So, I had urged my listeners back then, if you\\u2019re considering annuities, research your options well \\u2013 look into fees, commissions, payouts, inflation adjustments\\u2026 and compare them to yields on simple or inflation-protected U.S. Treasury or high-quality corporate bonds that yield a bit more, don\\u2019t charge exorbitant fees and do not lock-in your money or have you pay hefty penalties on early termination.
Annuity Regulation and Industry Impact
Then, in February 2015, President Obama proposed strict regulations that limit hidden fees, \\u201cback-door payments\\u201d and conflicts-of-interest \\u2013 in a bid to reduce investment fees, expenses and biased investment advice, such as when some advisers steer clients into funds that pay high kickbacks but do not deliver superior returns.

The proposed rule required financial advisers to act as \\u201cfiduciaries\\u201d for their clients and put clients\' interests ahead of their own compensation or company profits.
Regulatory pressure and negative coverage is beginning to have an impact on the less desirable aspects of the annuities industry.
And it seems, all this regulatory pressure and negative coverage is beginning to have an impact on the less desirable aspects of the annuities industry. As a recent article by Trevor Hunnicutt outlined in InvestmentNews.com (http://www.investmentnews.com/article/20150729/FREE/150729865/under-regulatory-pressure-voya-restricts-sales-of-more-variable?utm_source=Morning-20150730&utm_medium=email&utm_campaign=investmentnews&utm_term=text&CSFlag=3i4c3kfjfsfa5pt3p54ob2q5f3), a leading purveyor of annuities - Voya Financial Advisors - has restricted sales of variable annuities for the second time in two months,'